Senate backs legislation to raise taxes on wealthy Americans

Nearly two hours after the midnight deadline to keep the U.S. from diving off the so called "fiscal cliff," the Senate overwhelmingly approved an agreement to raise taxes on the wealthy.

The deal, worked out in heated negotiations since Sunday afternoon between Vice President Joseph R. Biden Jr. and the Republican Senate leader, Mitch McConnell, was approved in an 89-8 vote.

“This shouldn’t be the model for how to do things around here,” McConnell, R-Kentucky, said just after 1:30 a.m. “But I think we can say we’ve done some good for the country.”

Biden, after a late New Year’s Eve meeting with leery Senate Democrats to sell the accord, said: “You surely shouldn’t predict how the House is going to vote. But I feel very, very good.”

The White House-backed legislation would prevent middle-class taxes from rising, and tax rates would jump to 39.6 percent from 35 percent for individual incomes over $400,000 and couples over $450,000, CNN reported. In addition, tax deductions and credits would start phasing out on incomes as low as $250,000.

Monday’s deal also blocks spending cuts for two months until a new agreement can be reached; extends unemployment benefits for the long-term jobless; prevents a 27 percent cut in fees for doctors who treat Medicare patients; prevents a spike in milk prices; and also prevents a $900 pay raise for members of Congress from taking effect in March.

Here are a few in detail:

Long-term unemployment benefits: As CBS News notes, the U.S. tumbled into recession following the 2008 financial crisis, Congress enacted a temporary supplement to state-based unemployment insurance programs, which usually pay benefits for 6 months. Under the new fiscal deal, that measure will be extended for one year, preserving benefits for 2 million Americans who were at risk for losing benefits at year's end.

Tax credits for low- to middle-income earners: The bill includes a host of tax rate extensions. For example, the Child Tax Credit, Earned Income Tax Credit, and Obama Opportunity Tax Credit (college tuition credits) will all be extended for five more years, all which were part of the 2009 economic stimulus package.

Both Democratic and Republican senators concluded it was better to accept a deal despite their objections.

Sen. Kay Bailey Hutchison (R-Texas) told the Hill: "It's not something that any of us would say, 'Oh, I love it.' I don't love it, but I think it is a very good job of negotiating where there are some wins and some losses and it's about even."

Montana Democratic Sen. John Tester summed it up this way: Although far from perfect, it provides the tax relief Americans deserve while "preventing irresponsible cuts that would hurt our kids and seniors,” the Daily Caller reported.

Overall, it's a clear victory for President Obama, who ran for re-election promising voters that he would raise taxes on the wealthy, making them pair their fair share.

As the Hill notes, the passage of the bill is a significant victory for Biden, who might run for president in 2016, and McConnell, who is up for reelection next year.

“While neither Democrats nor Republicans got everything they wanted," President Barack Obama said in a statement after the vote. "This agreement is the right thing to do for our country and the House should pass it without delay.”

House vote expected before Wednesday

Senate approval sends the bill to the House, where Speaker John Boehner (R-Ohio) said the House will review the Senate bill.

“The House will honor its commitment to consider the Senate agreement if it is passed,” Boehner said. “Decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members — and the American people — have been able to review the legislation.”

The House is due back at noon Eastern time for a rare New Year’s Day session. A House vote is expected before Wednesday, the Associated Press reported. It remains unclear whether the bill will have the votes to pass in the Republican-controlled body.

Quick passage before the markets reopen on Wednesday would likely negate any economic damage from Tuesday’s breach of the so-called “fiscal cliff" which happened when senators missed a midnight deadline for action. That means the vote would largely spare the nation’s economy from the one-two punch of large tax increases and across-the-board military and domestic spending cuts in the New Year, the New York Times writes.

The 89-8 vote puts pressure on the GOP-led House to approve the legislation. Still, it remains to be seen if most House Republicans will back a bill that lacks the deep spending cuts.